Inventory system with expiration date: Pricing and replenishment decisions

Abstract

Every product has a life cycle i.e., the product has a certain time period for useable conditions for mankind. After the certain time period, the product is not for useable conditions and which is known as expired product. However, price discount is a very much attractive strategy in the present business situations. Using these two concepts in together, we introduce two supply chain models by assuming the demand of the product to be dependent on price. Also, shortages are considered and these depend on the customer waiting time. In both models, we formulate the problem mathematically, considering price as a decision variable, and prove their optimality. Two proposed solution procedures have been ameliorated and then solved two numerical examples in order to validate our proposed models as well as to compare which model is more economical. Two sensitivity analyses are performed to make a conclusion regarding of our paper.